Proactive Investors - Run By Investors For Investors

Bushveld Minerals rockets higher on Vametco buy-out

Bushveld will have 59.1% of Vametco once it completes the buy-out of partner Yellow Dragon.
picture of steel mill
Vanadium is steel hardening and rust preventing

Bushveld Minerals Ltd (LON:BMN) has completed a complex set of transactions to give it control of Vametco, a major vanadium producer based in South Africa.

As there are only two other major vanadium producing countries in the world, Russia and China, prospects look good for both Vametco and Bushveld.

“We’ve always believed the structure of the industry does favour us,” says Fortune Mojapelo, chief executive.

 “There’s the relative concentration of supply, but the commodity itself is a really solid one.”

Vanadium prices on the up

Rising vanadium prices have shown the timing of the deal to be nigh-on perfect.

In January 2016, vanadium languished at a low of US$14.41 per kgV, but SP Angel has just based its new 14p per share valuation of Bushveld using a long term price for the steel hardening additive of US$27.5 per kg/V.

China environmental rules pushing vanadium higher

The broker can see the price going even higher.

 “Ferro vanadium prices bounced off $34/kg and look as if they may move substantially higher in the short term and may also settle higher in the longer term.” 

SP Angel added its price assumption may well prove to be ‘very conservative’ if China continues to enforce environmental restrictions.

This will cause the long term closure of a number of plants and restricting the processing of vanadium-bearing slag material.

“If we were to assume today’s ferro vanadium price over the long term this would nearly double our valuation for Vametco and for Bushveld Minerals.”

The broker adds it had assumed no value to Bushveld’s vanadium redox battery division, even though this is being tipped as a potential source of electricity storage facilities at power stations.

SP Angel also allowed nothing for the Lemur coal/power plant development, where a power purchase deal has just been agreed.

Attractive terms of the deal

Bushveld will have 59.1% of Vametco once it completes the buy-out of partner Yellow Dragon.

The deal is being funded US$4.5mln in cash with the remainder in new shares. There are also two deferred payments of US$600,000 and a further payment based on profits.

“The deal appears highly value accretive as we value Vametco more highly than the indicated acquisition price on our vanadium assumptions,” added Angel.

At 9.25p, up 21%, Bushveld is valued at £61mln.

View full BMN profile View Profile

Bushveld Minerals Limited Timeline

Related Articles

September 26 2018
Mt Gilmore Project and the Cobalt Ridge cobalt prospect are priority focuses for the company which will present at the RIU Resources Investor Roadshow in Melbourne tomorrow.
Tin metal
December 06 2018
The company is aiming to scale-up production at Uis, once one of the world's leading tin mines, after a hiatus of more than 20 years
The central processing plant for Lance uranium projects
November 15 2018
The company hopes to reduce its production costs with a shift in chemistry.

© Proactive Investors 2018

Proactive Investors Limited, trading as “Proactiveinvestors United Kingdom”, is Authorised and regulated by the Financial Conduct Authority.
Registered in England with Company Registration number 05639690. Group VAT registration number 872070825 FCA Registration number 559082. You can contact us here.

Market Indices, Commodities and Regulatory News Headlines copyright © Morningstar. Data delayed 15 minutes unless otherwise indicated. Terms of use